The Covid-19 pandemic has made people realise the importance of building an emergency fund to deal with possible medical emergencies, salary cuts or job losses. Since the fund can be needed any time, it is usually invested in fixed rate instruments so that the returns can be known with certainty.
However, sharp interest rate cuts by the Reserve Bank of India (RBI) to combat economic slowdown have impacted returns of most fixed income investments. The widely popular liquid funds, too, have been hit. Some investment experts recommend arbitrage funds as an alternative to liquid funds. These funds buy shares in the cash market and sell an equal number of shares in the futures market, making money from the price difference between the two markets. Since the equity positions are fully hedged, market risk is largely eliminated. Can they be a substitute for liquid funds and other debt instruments such as bank fixed deposits (FDs)?
The Best Bet
Liquid funds and arbitrage funds are used to park money for the short term. Both have returned less than 3 per cent on a trailing basis in the past one year. Cumulative rate cuts of 250 basis points (1 basis point = 1/100th of a per cent) by the RBI since February 2019 have hurt returns from liquid schemes. In 2019, they had returned 6.33 per cent on an average. In 2020, this fell to 4 per cent.
Continue reading your story on the app
Continue reading your story in the magazine
The global entertainment major has completed five interesting years in India, focussed on its premium positioning. What lies ahead?
‘THE CLOCK IS ALWAYS SLOW; IT IS LATER THAN YOU THINK'
ANUJ PODDAR, EXECUTIVE DIRECTOR, BAJAJ ELECTRICALS
THE WELLNESS JAUNT
EARLIER THE NICHE OF FOREIGNERS, WELLNESS TOURISM IS GATHERING PACE AMONG INDIANS WHO ARE TURNING TO AYURVEDA, YOGA AND NATUROPATHY FOR HOLISTIC HEALTH.
Reading to Lead
STOPPED IN ITS TRACKS
THE INDIAN RAILWAYS’ PLAN FOR PRIVATE PASSENGER TRAINS GARNERED ONLY TWO BIDS, THWARTING ITS PLANS TO SHORE UP ITS FINANCES. WHAT WENT WRONG AND WHAT IS THE WAY AHEAD?
NJ GROUP FORAYS INTO RULE-BASED INVESTING
Not content with just being India’s largest mutual fund distribution firm, NJ Group is now venturing into the asset management business with a novel mutual fund built on rule-based investing. Although there are many bank-sponsored mutual fund houses, this is probably the first instance of a pure distribution house launching its own mutual fund house.
The Shape of Things to Come
THE DIGITAL REVOLUTION WILL GIVE INDIAN STOCK INDICES THEIR OWN NEW-AGE POWERHOUSES
BELLING THE BULL
INVESTING IN HIGH-RISK STOCKS FOR QUICK GAINS DURING A BULL RUN MAY WORSEN YOUR FINANCIAL HEALTH. HERE'S A GUIDE TO INVESTING IN A BULL MARKET.
HARSH TRUTHS, HARD JOURNEY
Harsh Mariwala and Ram Charan trace Marico's rise from relative obscurity to a company taking on multinational Goliaths, and winning.
'WHEN YOU HAVE THE BEST CONTENT, YOU CAN GROW A LOT'
OVER THE PAST two decades, Founder and Co-CEO Reed Hastings has shaped Netflix from being a DVD rental service to a $270-billion market cap entertainment powerhouse, in the process of transforming how the world consumes video entertainment.
Hot Shorts Summer
Traders who bet on bad news are the necessary foils of meme stocks
Who Really Gets Rich From Robinhood
The app makes millions funneling inexperienced investors to Wall Street traders. Did Alex Kearns pay with his life?
Bet On Infrastructure Stocks
On the heels of a $1.9 trillion COVID relief bill, President Joe Biden has unveiled a major infrastructure initiative that would spend $2 trillion over eight years, financed in part by an increase in corporate tax rates from 21% to 28%.
Did Anyone Hear a Pop?
Investors are worried that stocks are in a bubble— and that it’s going to burst.
How To Build (Or Rebuild) Wealth
Our 11-part plan will help you establish a solid financial foundation or take stock of your progress.
AMERICANS CAN PAY THEIR CREDIT CARD BILLS, BUT FOR HOW LONG?
The coronavirus pandemic hasn’t stopped Americans from keeping up with their credit card payments, thanks in large part to government relief programs passed by Congress earlier this year.
Getting More from Less
Everyone has been forced to cut back in some way—but limitations can lead us to even greater growth. We asked six entrepreneurs: What unexpected benefits have you gotten from change?
Are We Going Digital Forever?
The pandemic swiftly moved our world online. Once you discover the power of engaging your customers digitally, you won’t want to go back.
Japan's Softbank Back in The Black As Investments Improve
Japanese technology company SoftBank Group Corp. said it bounced back to profitability in the last quarter as its investments improved in value.
Focus On Your Mission
Our worlds may feel shaken. But we’re actually much sturdier than we think.